After much speculation, China is reportedly preparing to allocate a $40 billion state fund to boost its semiconductor industry, as the country aims to ameliorate its efforts to reach and surpass the U.S and other rivals.
China's President, Xi Jinping, has long stressed the necessity for China to achieve independence and self-sufficiency in semiconductor production. This major investment is most likely to be the greatest in magnitude of the three launched by the 'China Integrated Circuit Funds', alternatively known as the 'Big Fund'. However, the US and its allies have sought to restrict China's access to advance chips. This restriction has arisen over concerns and speculation that the Chinese government could implement more advanced semiconductors and consequentially accelerate its military modernization and further internal control.
In the past, the Big Fund has been a major beacon of support to major chip foundries, such as the 'Semiconductor Manufacturing International Corporation' and 'Hua Hong Semiconductor', along with a greater variety of smaller funds and enterprises. Despite previous efforts, China's chip industry has been subjected to various challenges in establishing itself as the dominant leader of the industry within the global supply chain, especially lacking in the domain of advanced chips.
In addition, this investment also acts as a counter to the U.S. government's bipartisan CHIPS Act, which subsidized roughly $39 billion in the manufacturing and production of advanced chips. Moreover, this investment does not come as a surprise as in late October of 2022, the U.S. implemented a severe sanctions package that majorly reduced Chinese access to advanced chipmaking equipment, whilst simultaneously resulting in both Japan and Netherlands to implement their own respective export controls in chipmaking equipment.
The importance of this investment cannot be stressed enough, with this strategic maneuver having far-reaching socioeconomic, technological, and geopolitical impacts. It signals the sheer determination of China to become an international superpower in the semiconductor sector and simultaneously eliminate its dependence on foreign sources.